A 'dynamic' future

Microsoft set to revamp enterprise-focused Dynamics but struggles to have its high-end credentials taken seriously.

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By  Eliot Beer Published  September 23, 2007

Microsoft has always struggled in certain sectors to have its high-end enterprise credentials taken seriously - many IT professionals regard it as a provider of office software and desktop operating systems, and little more.

The vendor has been working hard over the past few years to correct this perception, though. Its purchases of companies such as Navision and Great Plains in the early part of the decade gave the company a foothold in the core enterprise software market, and ever since, Microsoft has been trying to crack the market.

That’s what we’re aiming for – how can we keep growing our customer adds in a very healthy way?

Its well-entrenched competition - in the form of SAP and Oracle, as well as more niche but established players - have forced the Redmond firm to confine much of its efforts to the lower end of the market - the less complex, but still potentially lucrative SMB segment. Here it has met some success - Microsoft Dynamics was ranked third behind SAP and Oracle in the Middle East enterprise application space, according to an IDC report from October 2006.

The report, though, describes Microsoft's position as a "distant third" - demonstrating quite how large a gap the vendor has to make up in the enterprise market.

This, then, is Microsoft's goal - to move its Dynamics and other business solutions offerings up into larger enterprises, and fight a rearguard action against SAP and Oracle's renewed interest in the SMB space. To this end, the company completed a rebranding and realignment of its Dynamics range last year, and is now preparing the latest versions of the range for release from next year.

In one respect, the vendor is in a very strong position - MS Dynamics is largely a partner-driven offering, and Microsoft is able to boast impressive statistics: around 9500 partners offering 3000 vertical solutions, in addition to the 1744 specific solutions in its own catalogue.

But the firm is not intending to increase its partner numbers dramatically in order to boost sales, according to global general manager for Microsoft Business Solutions (MBS), Cesar Cernuda.

"A lot of the time, the argument is, I need partners, each partner produces this much revenue - if I have more partners, I'll get more revenue. One of the things we've changed in the way we execute is the way we look into partners. First, rather than looking at new partners, we're looking at our partners' capacity."

Cernuda sees one of Microsoft Dynamics key challenges as perception - currently with 300,000 customers worldwide, and turning over around US$1 billion, on paper the division does not appear to compete with the SAPs and Oracles of the enterprise world. But Cernuda says this appearance is misleading.

"A lot of the time, we get the question: you're a billion-dollar business, within Microsoft - when you look into some other companies, they have much larger revenues. But there's different ways to look into these revenues - some of the revenue is services, which Dynamics doesn't do at all. For some vendors, 70%-80% of their revenue is from services.

"So we can only compete in that 20%. Of this, some will be maintenance - which we don't get, our partners do all the maintenance. Then you have to look at licences, and how much revenue is net new licences, and how much is from existing customers," Cernuda adds.

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